VLCC tanker prospects dim for 2012 says survey
Saturday, 24 March 2012 | 00:00
In its annual report on the shipping industry, shipbroker Barry Rogliano Salles (BRS) doubts that the tanker industry and more specifically the VLCC market will have any reason to smile during 2012. "We are hardly optimistic with regard to the numbers. The fleet in service at 31 December 2011 amounted to 591 vessels. 63 new units have been delivered this year. 59 (including 9 scheduled for 2011 and deferred to 2012) are expected in 2012 (excluding late or delayed deliveries), equivalent to +10% of the global fleet this year alone" said the Paris-based shipbroker.
In terms of demand for tonnage, it mentioned that "the economic statistics indicate that global demand for crude oil should reach 89m bbl/d in 2011 and hardly more than 90m bbl/d in 2012... a relatively modest progression, and in line with the reduced prospects for global economic growth. Thus, 2012 promises to be a particularly difficult year for VLCC owners. The establishment of a new pool, bringing together four major shipowners (Maersk/MOL/Samco/Ocean Tankers) and controlling 50 vessels, will help to drive costs down by optimizing the operation of these ships, but one can question the real impact on the market. The excess tonnage on its way can only darken an already gloomy sky, and only the determination of shipowners to send their oldest units to the scrapyards will be able to alleviate the situation" said BRS.
In terms of asset values during 2011, the shipbroker noted that "for 2011, the year of the “Arab Spring”, we would highlight this quote by Djalal al-dîn Rûmi (1207-1273), the great Persian mystic whose 50,000 words of poetry are still today revered by Muslim scholars. Tanker owners were in 2011 – and will remain in 2012 – confronted by severely reduced income. They must therefore “hold on” for an increase in rates. The strongest and least financially exposed shipowners will be those who can hold on the longest. This year has demonstrated that the current crisis is entirely due to the excess tonnage on the water. Nothing could halt the decline in values for all tanker sizes, and of all ages during 2011. In sharp contrast to what would normally occur in a balanced market, neither the war in Libya, nor the Arab revolutions, nor the threat from Iran, or the Fukushima tragedy created lasting tensions in rates or asset prices. The measures taken by shipowners themselves, such as slow steaming and lay-up, were hardly more effective. Despite this, the number of crude tankers (VLCC, Suezmax, Aframax and Panamax tankers) demolished in 2011 remained below that of the previous year, with only 60 vessels sold for demolition versus 70 in 2010. Vessel values declined throughout the year at different tempos depending on size and age, but no class was spared. This is demonstrated The collapse in daily returns (combined with increased fuel prices), the retreat of the shipping banks, the overcapacity of tonnage on the water, the reduction in floating storage, and the steady stream of new deliveries have driven asset values lower, and in turn led to serious financial difficulties for many shipowners. Sales volumes
(including second hand sales and sales for demolition for VLCC to Panamax, OBOs excluded) has contracted by around 18%, with only 158 units have changing hands in 2011, compared to 193 the previous year" concluded BRS.
Meanwhile, in terms of the market this week, London-based shipbroker Gibson noted that "what goes up, must come down - a familiar truism in our marketplace, and proven this week for VLCCs in the Middle East Gulf where a careful management of the cargo flow softened the previously bullish sentiment, and allowed Charterers to squeeze the market back into the high WS 50’s East with West runs theoretically at around the WS 38 mark. Suezmaxes made a little early headway as earlier dates came into finer balance, but little was seen late week, and the market couldn’t get above 135,000 by WS 92.5 East and WS 55 West with little prospect of enough momentum being created to boost things in the near term. Aframaxes continued to move through a drought stricken landscape so that the top rate was 80,000 by WS 95 for Singapore, and lower values likely over the coming week" said Gibson.
It continued by mentioned that "it didn’t take long for suezmax Charterers to regain control in West Africa. The week started slowly, and Owners quickly started to take insurance and chase the market down some 20 worldscale points to end at 130,000 by WS 80-ish for US Gulf and WS 85 for Europe, where it should stay for the next fixing period. VLCCs also slipped badly to the East as the downturn in the AG market led ballasters to become more competitive. Rates fell to 260,000 by WS 60 as a result - some 10 worldscale points on the week - though locally positioned units stayed tight enough to prevent transatlantic rates from falling much below 260,000 by WS 70,though very little was contracted.
Aframaxes in the Mediterranean also took a tumble, or a series of tumbles, and rates ended some 30 per cent lower than last weeks close with 80,000 by WS 100 the present mark, and further discounting possible until enquiry picks up once again. Suezmaxes held up pretty well considering the negative events in West Africa, but inched down a little to 135,000 by WS 90/92.5 for Black Sea/Europe runs, nonetheless with China paying around USD 4.4 m lumpsum" said Gibson.
"VLCCs in the Caribbean received heavy attention for a while, and that countered the slight build-up in availability so that rates were maintained at no less than USD 5 m for Singapore, and will stay similar over the coming week. Aframaxes briefly moved to 70,000 by WS 125 upcoast, but then the plug was pulled, and Owners chased rates down to around WS 105 by the weeks' end where they are likely to now bottom out.
The end game is being played for ice class units as conditions improve, and availability therefore grows. Rates fell to 100,000 by WS 92.5 for those vessels from the Baltic, and also eased to 80,000 by WS 90 for 'standard' cross North Sea movements as enquiry petered out. Another chance for Owners next week, but the odds stay in Charterers favour. Suezmaxes drew a blank transatlantic, but there were attempts by both sides to cover to the East where rates held at up to USD 3.6 m for fuel oil to Singapore. The few VLCCs that were in the area were also snapped up with rates averaging around USD 5.5 m for Singapore, and close to USD 7 m for South Korea" concluded Gibson.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
In terms of demand for tonnage, it mentioned that "the economic statistics indicate that global demand for crude oil should reach 89m bbl/d in 2011 and hardly more than 90m bbl/d in 2012... a relatively modest progression, and in line with the reduced prospects for global economic growth. Thus, 2012 promises to be a particularly difficult year for VLCC owners. The establishment of a new pool, bringing together four major shipowners (Maersk/MOL/Samco/Ocean Tankers) and controlling 50 vessels, will help to drive costs down by optimizing the operation of these ships, but one can question the real impact on the market. The excess tonnage on its way can only darken an already gloomy sky, and only the determination of shipowners to send their oldest units to the scrapyards will be able to alleviate the situation" said BRS.
In terms of asset values during 2011, the shipbroker noted that "for 2011, the year of the “Arab Spring”, we would highlight this quote by Djalal al-dîn Rûmi (1207-1273), the great Persian mystic whose 50,000 words of poetry are still today revered by Muslim scholars. Tanker owners were in 2011 – and will remain in 2012 – confronted by severely reduced income. They must therefore “hold on” for an increase in rates. The strongest and least financially exposed shipowners will be those who can hold on the longest. This year has demonstrated that the current crisis is entirely due to the excess tonnage on the water. Nothing could halt the decline in values for all tanker sizes, and of all ages during 2011. In sharp contrast to what would normally occur in a balanced market, neither the war in Libya, nor the Arab revolutions, nor the threat from Iran, or the Fukushima tragedy created lasting tensions in rates or asset prices. The measures taken by shipowners themselves, such as slow steaming and lay-up, were hardly more effective. Despite this, the number of crude tankers (VLCC, Suezmax, Aframax and Panamax tankers) demolished in 2011 remained below that of the previous year, with only 60 vessels sold for demolition versus 70 in 2010. Vessel values declined throughout the year at different tempos depending on size and age, but no class was spared. This is demonstrated The collapse in daily returns (combined with increased fuel prices), the retreat of the shipping banks, the overcapacity of tonnage on the water, the reduction in floating storage, and the steady stream of new deliveries have driven asset values lower, and in turn led to serious financial difficulties for many shipowners. Sales volumes
(including second hand sales and sales for demolition for VLCC to Panamax, OBOs excluded) has contracted by around 18%, with only 158 units have changing hands in 2011, compared to 193 the previous year" concluded BRS.
Meanwhile, in terms of the market this week, London-based shipbroker Gibson noted that "what goes up, must come down - a familiar truism in our marketplace, and proven this week for VLCCs in the Middle East Gulf where a careful management of the cargo flow softened the previously bullish sentiment, and allowed Charterers to squeeze the market back into the high WS 50’s East with West runs theoretically at around the WS 38 mark. Suezmaxes made a little early headway as earlier dates came into finer balance, but little was seen late week, and the market couldn’t get above 135,000 by WS 92.5 East and WS 55 West with little prospect of enough momentum being created to boost things in the near term. Aframaxes continued to move through a drought stricken landscape so that the top rate was 80,000 by WS 95 for Singapore, and lower values likely over the coming week" said Gibson.
It continued by mentioned that "it didn’t take long for suezmax Charterers to regain control in West Africa. The week started slowly, and Owners quickly started to take insurance and chase the market down some 20 worldscale points to end at 130,000 by WS 80-ish for US Gulf and WS 85 for Europe, where it should stay for the next fixing period. VLCCs also slipped badly to the East as the downturn in the AG market led ballasters to become more competitive. Rates fell to 260,000 by WS 60 as a result - some 10 worldscale points on the week - though locally positioned units stayed tight enough to prevent transatlantic rates from falling much below 260,000 by WS 70,though very little was contracted.
Aframaxes in the Mediterranean also took a tumble, or a series of tumbles, and rates ended some 30 per cent lower than last weeks close with 80,000 by WS 100 the present mark, and further discounting possible until enquiry picks up once again. Suezmaxes held up pretty well considering the negative events in West Africa, but inched down a little to 135,000 by WS 90/92.5 for Black Sea/Europe runs, nonetheless with China paying around USD 4.4 m lumpsum" said Gibson.
"VLCCs in the Caribbean received heavy attention for a while, and that countered the slight build-up in availability so that rates were maintained at no less than USD 5 m for Singapore, and will stay similar over the coming week. Aframaxes briefly moved to 70,000 by WS 125 upcoast, but then the plug was pulled, and Owners chased rates down to around WS 105 by the weeks' end where they are likely to now bottom out.
The end game is being played for ice class units as conditions improve, and availability therefore grows. Rates fell to 100,000 by WS 92.5 for those vessels from the Baltic, and also eased to 80,000 by WS 90 for 'standard' cross North Sea movements as enquiry petered out. Another chance for Owners next week, but the odds stay in Charterers favour. Suezmaxes drew a blank transatlantic, but there were attempts by both sides to cover to the East where rates held at up to USD 3.6 m for fuel oil to Singapore. The few VLCCs that were in the area were also snapped up with rates averaging around USD 5.5 m for Singapore, and close to USD 7 m for South Korea" concluded Gibson.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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